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Chances Dwindle on Bailout Plan for Automakers

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November 14, 2008

Chances Dwindle on Bailout Plan for Automakers

By DAVID M. HERSZENHORN

WASHINGTON — The prospects of a government rescue for the foundering American automakers dwindled Thursday as Democratic Congressional leaders conceded that they would face potentially insurmountable Republican opposition during a lame-duck session next week.

At the same time, hope among many Democrats on Capitol Hill for an aggressive economic stimulus measure all but evaporated. Democratic leaders have been calling for a package that would include help for the auto companies as well as new spending on public works projects, an extension of jobless benefits, increased food stamps and aid to states for rising Medicaid expenses.

But while Democrats said the stimulus measure would wait until President-elect Barack Obama takes office in January, some industry experts fear that one of the Big Three automakers will collapse before then, with potentially devastating consequences.

Despite hardening opposition at the White House and among Republicans on Capitol Hill, the Democrats said they would press ahead with efforts to provide $25 billion in emergency aid for the automakers. But they said the bill would need to be approved first in the Senate, which some Democrats said was highly unlikely.

Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the banking committee, said he did not believe there would be enough Republican support to get the 60 votes needed to move a bill forward. “Right now, I don’t think there are the votes,” he said, adding that he personally favored aid for the automakers.

As the outlook for an auto industry bailout dimmed, President Bush traveled to Wall Street, where he gave a robust defense of capitalism and seemed to warn world leaders — and the incoming Obama administration — not to draw the wrong lessons from the global economic crisis by over-regulating markets and hindering free trade.

The White House, in resisting calls for aiding the automakers, has also warned repeatedly against throwing taxpayer money at companies that may not be salvageable.

Acknowledging the Bush administration’s opposition, Mr. Dodd said Democrats had to keep in mind that the Treasury Department already has some authority to help the finance arms of the auto companies but has been reluctant to use it.

“I want to be careful about bringing up a proposition that might fail in light of the fact the authority exists, and under an Obama administration there seems to be a greater willingness to deal with the issue,” Mr. Dodd said. “So there are some political considerations to be made.”

Passing any legislation to aid the auto companies would require 60 votes in the Senate. Democrats now control 51 of those votes, but Mr. Obama has said he will resign his Senate seat on Sunday, and Vice President-elect Joseph R. Biden Jr. is not expected to attend the lame duck session, meaning Democrats would need the support of at least 11 Republicans.

With Mr. Bush still wielding his veto authority, the fate of any legislation without White House support would be uncertain.

The auto companies, however, remained hopeful and said they would send top executives to Congressional hearings next week to make their case.

“We hope all parties recognize there’s a pressing need to preserve the domestic auto industry and the jobs and nation’s competitiveness that’s tied to the industry,” said Greg Martin, a spokesman for General Motors. “We’re ready and willing to work with all members of Congress to get this assistance.”

The majority leader, Senator Harry Reid of Nevada, and House Speaker Nancy Pelosi have urged the Bush administration to help the automakers and said they were prepared to try to push through legislation if the White House refused to act.

Mr. Reid, on Thursday, said that he would open a lame-duck session in the Senate on Monday, hoping to move forward with legislation that would extend unemployment benefits and to attach an amendment providing aid for the auto companies.

Aides to Ms. Pelosi said the House would be brought back into session as of 1 p.m. Wednesday and would remain on standby, awaiting action by the Senate.

Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, is working on a measure that would direct $25 billion to the carmakers from the $700 billion financial bailout fund. Aides said Mr. Frank was collaborating with his Democratic colleagues in the Senate.

President Bush, however, has not signaled any willingness to tap the bailout fund, which the Treasury has said is money better spent on financial institutions. And some powerful Republican lawmakers have voiced strong opposition to government aid for the automakers.

Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, said he would not support legislation to aid the auto companies and seemed prepared to let one or all of them collapse.

“The financial straits that the Big Three find themselves in is not the product of our current economic downturn, but instead is the legacy of the uncompetitive structure of its manufacturing and labor force,” Mr. Shelby said in a statement. “The financial situation facing the Big Three is not a national problem but their problem.”

On Thursday, Representative John A. Boehner of Ohio, the Republican leader, also came out strongly against the idea.

“Spending billions of additional federal tax dollars with no promises to reform the root causes crippling automakers’ competitiveness around the world is neither fair to taxpayers nor sound fiscal policy,” Mr. Boehner said in a statement.

Representative Jeb Hensarling of Texas, chairman of the conservative Republican Study Committee, in an appearance on Fox News, said: “You wonder where bailout-mania will end.”

Mr. Hensarling said American automakers should bear responsibility for their failed operations. “They are producing high-cost products that consumers don’t want to buy. And so now we have Washington on the verge of giving them a bailout simply because we have all heard of them and they have high-priced lobbyists.”

The Senate Republican leader, Mitch McConnell of Kentucky, has expressed support for expediting $25 billion in loans for the auto companies that Congress approved in September. But he has not indicated any willingness to provide additional money or to use money from the financial bailout fund for the car makers.

“Earlier this year, Congress acted in a bipartisan way to help the auto industry and protect jobs,” said Don Stewart, a spokesman for Mr. McConnell. “The Congress passed and the president signed legislation authorizing $25 billion in low-interest loans to help American automakers retool their facilities to make the fuel-efficient cars of the future. It may be that there are changes that need to be made in order to expedite these low-interest loans.”

Mr. Stewart added: “Other ideas have been floated, and all will receive a review as we approach the Senate’s return next week.”

Ms. Pelosi so far has rejected the idea of easing restrictions on those loans, which require carmakers to develop technologies that will improve fuel efficiency. But Mr. McConnell’s suggestion, also encouraged by the White House, may be the only potential compromise and one Republicans could support because it does not require a new appropriation of federal funds.

Some Republicans also suggested that there was less support among rank-and-file Democrats for an auto bailout than party leaders were letting on.

One Republican, Senator George V. Voinovich of Ohio, whose state relies heavily on the auto industry, voiced strong support on Thursday for using bailout money to help the failing car companies. Mr. Voinovich was working with Senators Carl Levin and Debbie Stabenow, Democrats of Michigan, to drum up support for such a plan.

Mr. Levin met Thursday afternoon with Mr. Reid in the majority leader’s office to map out their strategy.

Complicating the effort to aid the carmakers is the ownership structure of Chrysler, a limited partnership controlled by Cerberus Capital Management, a private equity firm. The firm said it would give up any profits from a future sale of the company in exchange for financial assistance from the government, hoping to limit political opposition in Washington to aid for a privately held company, according to Bloomberg News.

The shaky support for an auto industry bailout in general had left Ms. Pelosi uncertain about whether calling the House back into session would be worth the trouble.

Jim Manley, a senior adviser to Mr. Reid, said there was no chance of approving help for the auto companies without broad support from across the aisle. “We cannot do it without the support of Senate Republicans, who I hope will join us to pass a bill that saves the jobs and protects the livelihoods of millions of hard-working Americans,” Mr. Manley said.

Carl Hulse contributed reporting from Washington, and Bill Vlasic from Detroit.

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Reuters

Auto bankruptcy protection won't work: report

Friday November 14, 5:12 am ET

Excerpt from the article:" "It doesn't add up that they (the Bush Administration) are letting GE and American Express to become banks to get aid, but they won't save the car industry," Ross told the agency."

http://biz.yahoo.com/rb/081114/business_us...ss_gm.html?.v=3

You don't say. :scratchchin:

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Looks like with no bailout they'll have to file chapter 11. They are going to run out of cash before they get help, 10 years of short term thinking has killed them. Too late to sell off Hummer or Saab now and get the money in time, although they should still do it since they'll need the money anyway.

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Looks like with no bailout they'll have to file chapter 11. They are going to run out of cash before they get help, 10 years of short term thinking has killed them. Too late to sell off Hummer or Saab now and get the money in time, although they should still do it since they'll need the money anyway.

There is simply no way that this would be allowed.

Those that know nothing all 'voicing' their opinions and bloviating all over the 'Net.

Those that do know are saying nothing and leak tidbits through surrogates.

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Looks like with no bailout they'll have to file chapter 11. They are going to run out of cash before they get help, 10 years of short term thinking has killed them. Too late to sell off Hummer or Saab now and get the money in time, although they should still do it since they'll need the money anyway.

I hope you're in a giving mood, because if GM goes bankrupt, you and every other American will be writing a check to Uncle Sam to cover all GM's liabilities.

You don't have to be a fan of GM, but the cost of allowing it to die is simply too great to allow to happen.

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I hope you're in a giving mood, because if GM goes bankrupt, you and every other American will be writing a check to Uncle Sam to cover all GM's liabilities.

You don't have to be a fan of GM, but the cost of allowing it to die is simply too great to allow to happen.

As if this all is not going on some Celestial American Express Card. GM. Ford and Chrysler are National assets as it pertains to a solid manufacturing base. The petty dialogue of perceived past misdeeds is simply petty and petulant. I believe they should be admonished, absolved and then helped.

The argument is being made that our grand-children's children will be paying for all of this. I think that in 3 or 4 generations hence they'll have licked the time travel thing, coming as it will be as a part of PlayStation 24, and if they haven't been back here already to kick our asses then they must have come up with a solution to reconcile this.

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I am only stating the obvious, that if there is no bailout until February or later, GM will be out of money by then. Businesses without money can't stay open, they won't be making payroll and the employees won't show. Chapter 11 is their best route because at least they can stay open, if they don't do that, and have to go to chapter 7 it's over forever.

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The effect on GM's sales of a bankruptcy would ensure that anyway smk. Even the rumor of bankruptcy has a negative effect. To add to the bad news, suppliers have been told by European insurers they cannot supply components to the Big 3 without cash in advance.

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Last I read Ford was planning to go ahead with it's plans, and continue developing new and desirable products with or without the "bailout" money.

Chrysler has cash and from reports has stemmed most of the bleeding to make it until 2010 when a variety of new products debut, assuming it isn't sold off.

It seems that only GM is desperate for the money, and that management was asleep at the wheel yet again, not making sure to stop the bleeding, and still work on new cars.

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Good one, I almost thought it was April already.

Cerberus has promised not to make any money from Chrysler in exchange for a capital injection.

GM is still working on new cars, and you have to look at delays in the light that most other automakers are doing the same. Blaming management is like blaming a surgeon because someone was shot. The economic situation has deteriorated faster than anyone could have predicted, and hit automakers harder than anyone could have expected. Who could have expected that dealers would be told they could not buy cars, that they could not line up finance for the cars they have, that suppliers would not be allowed to sell to the Big 3? How does any measure of planning stop that?

I don't want to hear anymore BS about years of losses pointing to management incompetence. The incompetence was in the union leaders and GM management decades ago, not now. The last several years of big losses have stemmed from past idiocy in demanding and conceding company pensions and healthcare. Everything the current management has done has been to fix that problem. That is where the losses have come from (both operational and extraordinary), not the bad planning of the current executives. Hundreds of billions of dollars had to be poured into the UAW pension plan, tens of billions more to provide healthcare at sky-rocketing prices. Forget Toyota, no new auto company would face these burdens. They tried closing a division, which all the armchair pundits still call for, and it only cost them money and sales. Not until the financial situation was transparently dire could they convince the UAW to accept concessions, and even then it was not without resistance, and at great expense. The restructuring plan has been devised, it is in progress already, but until 2010 it will have no immediate impact on cash flow. The UAW held on too long, the economy collapsed, and that put them into this mess. To ask now "What are you going to do to change things?" simply shows the gross ignorance of pundits and politicians. Employment has been slashed, wages will be reduced dramatically, healthcare will be passed to the VEBA trusts. That is already coming. Calls by many to simply not fund the VEBA and deny health coverage are grossly offensive. Didn't all this change you voted for include providing healthcare to everyone? How can anyone now call on the government not to fund GM because it would only go to provide healthcare to UAW workers? The government should be funding 100% of VEBA, not just for the UAW, but everyone else as well. Perhaps the UAW should offer to give back $50 billions set aside for pensions and VEBA, if the Democrats will promise to replace the money next year. I don't see either the UAW or the Democrats doing anything of the sort, do you?

Edited by thegriffon
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Griff': Through back-channels out of the UAW Locals that I'm affiliated with, I'm hearing this very idea. Collateral of sorts. Stay tuned.

But again I've seen many rumors/hypothesis crash and burn.

The UAW's single 'demand' if you will: Maroon Rep. John Boehner ® Ohio on a desert island. :breakdance:

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Blaming management is like blaming a surgeon because someone was shot. The economic situation has deteriorated faster than anyone could have predicted, and hit automakers harder than anyone could have expected. Who could have expected that dealers would be told they could not buy cars, that they could not line up finance for the cars they have, that suppliers would not be allowed to sell to the Big 3? How does any measure of planning stop that?

I think a better analogy would be. Blaming management is like blaming a patient because they were shot. The patient may be the innocent bystander in a drive by at which case they're not at fault. The patient could have also been in a bad neighborhood and got shot in which case, they're partially to blame for putting themselves in a bad situation.

I definitely believe that GM would have the ability to negotiate it's way back to health if the credit crisis had not occurred. I also see that Toyota and Honda are not going bankrupt because of this. GM's management is responsible for the shape it was in when the credit crisis hit. It's like taking an old rusty ship with a broken bilge pump out and getting caught in a storm. Sure the boat may have been rehabilitated and safe if the storm didn't hit, but what the hell was it doing in that kind of shape to begin with.

I hope that GM gets the support it needs. Having a manufacturing base is a matter of national security as well as important to protecting the value of the dollar. If we have no products to export then our dollar will devalue further as no countries will want our money, because there will be nothing to buy from us. I hear this fantasy that we sell ideas now not products. Unfortunately it turns out people in developing countries are just as intelligent as we are and will come up with ideas of their own. We cannot sustain this country if we don't make our own products.

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Alabama is backed by Benz, Honda, and Hyundai, so their Senator doesnt care. Also, since Detroit is a Northern city, another reason AL doesnt care, too.

Well, when people lose their jobs, they can all go to Alabama and ask for unemployment $!

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I think a better analogy would be. Blaming management is like blaming a patient because they were shot. The patient may be the innocent bystander in a drive by at which case they're not at fault. The patient could have also been in a bad neighborhood and got shot in which case, they're partially to blame for putting themselves in a bad situation.

I definitely believe that GM would have the ability to negotiate it's way back to health if the credit crisis had not occurred. I also see that Toyota and Honda are not going bankrupt because of this. GM's management is responsible for the shape it was in when the credit crisis hit. It's like taking an old rusty ship with a broken bilge pump out and getting caught in a storm. Sure the boat may have been rehabilitated and safe if the storm didn't hit, but what the hell was it doing in that kind of shape to begin with.

I hope that GM gets the support it needs. Having a manufacturing base is a matter of national security as well as important to protecting the value of the dollar. If we have no products to export then our dollar will devalue further as no countries will want our money, because there will be nothing to buy from us. I hear this fantasy that we sell ideas now not products. Unfortunately it turns out people in developing countries are just as intelligent as we are and will come up with ideas of their own. We cannot sustain this country if we don't make our own products.

You can't put a company in drydock though. Wagoner and co. have been patching the hull and fixing the engines as fast as they could because they knew it was sinking, even without the storm. The lack of maintenance happened before they took over, and until the pump broke down they couldn't convince the passengers they needed to start throwing their excess baggage overboard and head for the lifeboats.

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Isn't Ohio a UAW state? Surely they can apply some heat to make him change his mind, or has he lost his seat already?

Yes, but as GM's star dims somewhat, we find Boehner aligning himself more with the Honda camp.

GM's stamping plants are in play with the volume reductions we've seen recently. Defiance's foundry is a 'muddle' too. GM would like to see more traditional tier-one employees leave.

They will get their wish I'm thinking.

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It turns out that ideas can be imported even easier than manufactured goods, and without worrying about the cost of insurance or fuel. It's a shame that the only industry to realize that goods should be made locally and the ideas distributed is being crushed in the USA.

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It turns out that ideas can be imported even easier than manufactured goods, and without worrying about the cost of insurance or fuel. It's a shame that the only industry to realize that goods should be made locally and the ideas distributed is being crushed in the USA.

It takes a village.

I think of it in those terms.

See you good folks later.

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Alabama is backed by Benz, Honda, and Hyundai, so their Senator doesnt care. Also, since Detroit is a Northern city, another reason AL doesnt care, too.

Well, when people lose their jobs, they can all go to Alabama and ask for unemployment $!

Ding ding ding ding...by Jove I think you've got it!

Of course politicians from the South aren't interested in helping out the domestics - they're getting paid off by the Asians and the Germans to allow them to operate in their states for next to nothing. It's absolutely f@#king insane if you ask me. Of course the New York Times won't really spin it that way, as I'm convinced those know-nothings (about the car industry) want to see GM die, as well as their loyal readership.

We live in a f@#ked up country of people who don't give a $h! about one another, or whether or not we can succeed on the international playing field. We'd rather rant and rave about how awesome Japanese hybrid cars are and how GM missed out on an opportunity, while we watch Toyota, Nissan and now even Kia introduce more trucks and SUV's built on free land in the South, given to them by our fearless leaders in Washington.

We're a nation of ass holes (I'm directing that sentiment at all of the Left and Right Coast "Intelligencia" writing op-ed's for the Times and the like), and the collapse of GM is going to be extremely painful for me to watch, especially considering the fact GM put food on my table through the 70s and early 80s.

My gut is telling me that GM isn't going to get the loan. All the while the Asian companies will continue to get carte blanche benefits in this country, and continue to secure themselves as having the most distinct advantage ever on an unfair playing field - which has been quite unfair for some time now.

We need to tell those ass holes in Washington, and the writers and "analysts" that come on NPR and rip on the Big 3 that they need to all jump on board and come in for the big win when it comes to American technological leadership and industrial might. We're losing my friends, we're losing big time - and the downfall of our domestic auto industry is going to be very, very painful, on all fronts.

George Bush being "cool" on helping out the auto manufacturers is proof positive that this guy is a complete goon.

Edited by gmcbob
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President Bush traveled to Wall Street, where he gave a robust defense of capitalism

but injected 700b into his buddies in wall street. how much more to his buddies through an Iraq war and his exxon buddies too?

the odd irony is failure of the auto industry will cause ripple effects that will hurt our ability to buy gas from BushCheneyOil inc.

no wonder an Alabama senator is against an auto bailout. his state paid for hyundai to come in and set up shop, right?

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no wonder an Alabama senator is against an auto bailout. his state paid for hyundai to come in and set up shop, right?

And Mercedes.. I would think the Senators/Representatives from the 'transplant' states (Alabama, Tn, Tx, Miss., S. Carolina) will be against helping Detroit..though some (Indiana, Ohio, Kentucky) have both import and domestic plants, so those will be more problematic..

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i dont know, we only have bmw. that was supposed to start a manufacturing boom for us but it really hasnt. we really really REALLY wanted benz but were too "poor" to coax them to settle in.

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Cool down. All the Administration is asking for is an authorization bill from congress. So what if you think it might fail, it's irresponsible to blame the other side and not even try. If they vote against it, fine, blame them then, but right now all I see are excuses being made by people who aren't all that interested in doing anything to start with. Everything the Republicans demanded before they'd sign the bad loan bill they are being offered by GM—caps on executive compensation (and who said that would never happen or that they haven't offered already), specified spending on green vehicle programs (because they were doing that anyway), a preferred stock option (i.e. the government gets paid back before stockholders get anything) etc.

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Among other things, they have the Association of International Auto Manufacturers represented, claiming that the AIAM supports a bailout for two reasons: the economic impact will effect everybody, and when suppliers go down, it will disrupt production for everyone.

An EU member claims they will fight a bailout in the WTO, but then in the next breathe says they're planning something similar for European manufacturers. Clearly, he's just a self-serving idiot politician.

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